A media storm has broken out in China after it emerged that Foxconn, which makes Apple iPod music players, has had a court freeze the assets of two journalists who attempted to expose alleged poor working conditions of its employees.

As the biggest defamation case filed against individual journalists in China, the case looks likely to make legal history. With news organisations accusing Foxconn of bullying tactics, it also poses possible further damage to the company's relationship with Apple Computer.

Foxconn, the trade name of the Taiwan IT firm Hon Hai Precision, is demanding 30m yuan (nearly £2m) from a reporter, Wang You, and an editor, Weng Bao, of the China Business News, based in Shanghai.

The Taiwanese company, contracted by Apple to assemble and supply products such as the iPods, claims the paper exaggerated a report on June 15, which accused it of forcing employees at its manufacturing centre in Longhua, Guangdong, to work overtime for low pay and to endure cramped conditions in its dormitories. Workers told the reporters they were not allowed to talk and had to stand for hours.

The Mail on Sunday and Sunday Mirror alleged that some of the 200,000 employees at the plant worked 15-hour shifts with a monthly pay of less than 400 yuan (£26). Foxconn insisted it paid at least the minimum legal wage of 580 yuan. Apple, which investigated Longhua, said it found no evidence of forced labour but said Foxconn did exceed work hours limits.

Foxconn, which also makes products under licence for Dell, Intel and Sony, promised improvements but now seeks retribution, and the defendants' assets have been frozen by the Shenzhen intermediate people's court pending a hearing.

China Business News said the entire national press would condemn the move and warned Foxconn to withdraw the case or face legal action.